Comment on Labeau v. GE Capital Retail Bank - Deemed admissions used against bank customer

Current rules give unfair advantage to mass-litigation attorneys targeting Texas consumers

Labeau v. GE Retail Bank formerly GE Money Bank

CASE NOTE AND COMMENT  ON USE OF DEEMED ADMISSIONS AGAINST DEBTORS WITHOUT LAWYERS 

This case has an important lesson, and a sad one: Don't try to help your spouse with litigation (unless you are a lawyer).

Husband was sued on a credit card, but did not get himself together to file his own paperwork, or thought the wife would do a better job being his advocate in addition to mounting her own defense. They were both named as defendants.

Creditor, GE Capital Retail Bank (formerly GEMB), filed motion for summary judgment based on deemed admissions, which was granted over the objection of the debtor's spouse. The Fort Worth Court of Appeals affirmed on appeal, pointing out the incompetence of the defense under the current rules governing litigation.

Some of these rules are bad rules, and the Supreme Court, and Texas Legislature (to the extent that's required), should change them. Why are they bad? Because they are out of sync with reality and lend themselves to abuse and deception, on a massive scale.

Unauthorized practice of law: Can't afford a lawyer. Out of luck. Family member can't help you. Is not allowed to help you!

The official purposes of the Unauthorized Practice of Law Committee (UPLC), and the law under which it operates, is to protect the public from substandard legal representation. But many people can't get a lawyer, good or otherwise, because they can't afford one. In the case of debtors, that's why they are in default in the first instance.

The rule that prohibits family members from helping family members in court punishes what the law otherwise recognizes as a duty (at least to some extent), namely that spouses take care of each other, not to mention a moral obligation and the right thing to do.

While trial judges condone many other procedural and evidentiary errors if there is no objection (you have to be an attorney, or be well-versed in law to make the right one), trial judges do enforce the rule that family members are not allowed to advocate on behalf of one of their own. They enforce that rule, while remaining silent on many others unless a competent lawyer raises the issue, such as pleading deficiencies, hearsay exceptions, and objections to incompetent or otherwise defective affidavits. This does not mean they are being mean. Some may very well stop non-lawyers in their tracks in good faith because what they are doing may also subject them to the possibility of criminal prosecution, though that's a stretch. Be that as it may, family members will typically not be allowed to speak for other family members in court (except as witnesses), and may not sign court-filed papers on their behalf. It's a big no-no, and courts of appeals have harped on it time and again.

This case is  no exception. Spouse, rather than defendant, signed motion for continuance and did not ask for withdrawal of deemed admissions. At least, this time the panel opinion did not go so far as to suggest that the spouse may have committed a crime.

Deemed admission: Perversion of a tool for lawyers to streamline litigation 

Deemed admissions result from failure to answer requests for admissions. The original purpose of that rule that authorizes Requests for Admissions is to allow litigants to reduce the number of issue for trial by disposing of those that are not really contested or not worth arguing about.

But requests for admissions are these days mostly used for an entirely different purpose: To trap unrepresented litigants who are known to be unlikely to respond. After all, they get these requests from an attorney suing them, -- an attorney who may even have stated in a letter or in the pleadings themselves that any information will be used for debt collection purposes. Sounds like another well-known phrase: Anything you say may be used against you. the Miranda warning. This one is known to the public from myriad cop and crime shows on TV. So why would average unsophisticated telly-watching folk who find themselves the target of a lawsuit respond  to request for information when they have just been warned that everything they say will be used against them?

What the lay defendants don't know or appreciate is how their failure to respond will be used against them, and that judgment can be entered on deemed admissions even if default judgment cannot be entered after they have filed an answer (or written a letter to the judge).

A modest proposal: Abolish the deemed admissions rule, and replace it with a rule authorizing the filing of stipulations signed by both parties or their attorneys.

The Texas Supreme Court should abolish or change the deemed admissions rule because it was being intentionally misused by attorneys engaging in mass-litigation against individuals most of whom will not hire legal counsel. Debt collection attorneys know how to exploit the current rules and use them for purposes for which they were not intended. Additionally, the rule allows them the get Defendants to admit (by doing nothing) facts that even the debt collection attorney knows to be false, or does not care if they are false.

Modest changes to benefit the lawyerless masses, but only in JP and family courts so far

The Supreme Court has recently promulgated new rules for justice court. Among those is a rule that allows family members to act on behalf of defendants in debt suits filed in those courts, though it requires the judge's permission, and the "representation" is limited. The operative word is "assisted".

Additionally, the Supreme Court has taken note that large numbers of people try to get divorced without a lawyer, many no doubt because they cannot afford one. The highest court, over the vociferous objections of the Family bar, thus promulgated pro se forms to help those unrepresented litigants.

The rules of procedure for county and district court should also be amended to make them more user-friendly, rather than giving an unfair advantage to debt collectors engaging in mass litigation. The debt collectors' tactics can be effectively countered only by those defendants who can afford to mount a defense with counsel, or become legally savvy extremely quickly. It only takes a little over 50 days to end up with deemed admissions; and only 30 if they are served under rule 21a. A typical pro se litigant would not know that, and most probably won't trust the debt collection attorney telling him or her as much. And a month is hardly enough for even a college-educated lay person to become legally savvy.

Even a three-year law school education, followed by bar exam passage, does not make freshly licensed attorneys ready for litigation. If left without supervision, they will predictable make numerous mistakes. How can the general public be expected to know how deemed admission operate and how to undo the damage once the relentless operation of the rule has inflicted it?

Here is the tale of LaBeau, as told by the court of appeals: 

LaBeau did not respond to the motion for summary judgment, but his wife attached to the June 5, 2012 motion for continuance (which bore only her signature) a document entitled "Facts to be Admitted or Denied." She admitted making the agreement with Lowe's Home Improvement, stated that Lowe's "third partied" the agreement with GE Capital, and denied the amounts due and owing. She also claimed she had sent two checks to Lowe's, one for $1,350 and one for $1,800, and that she had attempted to resolve the matter in good faith.

Even if the motion for continuance could be construed as a motion to withdraw the deemed admissions, it was filed by LaBeau's wife rather than LaBeau.[3] See Tex. R. Civ. P. 7. There is nothing in the record from LaBeau asking the trial court to withdraw the deemed admissions or otherwise responding to the motion for summary judgment.[4] See Unifund CCR Partners v. Weaver, 262 S.W.3d 796, 797-98 (Tex. 2008). Accordingly, we conclude and hold that the trial court did not err by granting summary judgment, and we overrule LaBeau's second issue.

Decision 

Having overruled both of LaBeau's issues, the Forth Worth Court of Appeals, in an opinion by Chief Justice Terrie Livingston, affirmed the trial court's judgment and ordered LaBeau to pay the costs of the appeal.

Comment 

The decision of the Second Court of Appeals is not wrong under existing law. It is just not right. It is not right because the rules under which the appeal was decided subvert, rather than promote, the merits-based resolution of cases. But the problem is the nature of the rules themselves that permit non-merits based adjudication of cases brought against unsophisticated defendants based on deemed admissions. The remedy is their amendment by the Texas Supreme Court, -- which is the relevant rule-making "agency" with respect to rules of procedure and evidence.

Case info and link to appellate docket sheet and on-line opinion on the court's website  

Michael LaBeau v. GE Capital Retail Bank f/k/a GE Money Bank, No. 02-12-00284-CV (Tex.App. -- Fort Worth, July 16, 2012) (Opinion by Chief Justice Terrie Livingston) (click docket number).

(Click image to enlarge it)

GE Capital Retail Bank formerly known as GEMB, Appellee, was represented by Joseph Marse O'Bell, a ZWICKER AND ASSOCIATES attorney handling debt collection cases in Texas for multiple creditors.

Pro Se Defendants often court Defeat and Default Judgment, if not Disaster, by doing nothing or making things worse

COMMON ERRORS BY UNREPRESENTED LITIGANTS

Stasis & Default:  Not doing things that need to be done.

Debt suit defendants typically know little or nothing about the rules of procedure and thus suffer the adverse consequences for not hiring a lawyer (or not being able to afford one) to explain matter to them, or do what needs to be done on their behalf. As a result, debt collection attorney’s “win” a lot of cases simply because the case is not contested at all, or because the defendant makes a serious error that relieves the plaintiff from proving its case.   

Failure to file an answer

It does not take much to prevent a default judgment. All that is required is the filing of an answer, and the courts are very lenient when it comes to judging whether a piece of paper qualifies as an answer. Even a letter to the judge may do, although the rules that require a copy be sent to the opposing party’s attorney would still apply (and would likely be ignored).

Many defendants, however, do not only fail to hire a lawyer, but fail to take any action at all, thus inviting what in most cases is highly predictable, a default judgment. --> Default Judgment Signed, Now what? --> The challenges of appealing a judgment in collection suit without a lawyer. 

Failure to answer REQUESTS FOR ADMISSIONS

Same for requests for admissions. Doing nothing has grave consequences. Not answering them will result in deemed admissions by default. A defendant may not want to believe that they are due within 30 or 50 days as stated on the paperwork. That's understandable. After all, it's the attorney that’s suing them that says so; -- the same attorney that also may have stated that “all information obtained will be used for debt collection purposes” or something to that effect.  But the defendant’s distrust or wariness about providing information does not suspend the operation of the deemed admissions rule. It does not matter that the defendant took the FDCPA (mini-miranda) warning seriously and refused to provide the information that was requested. It's a trap for the unwary, and collection attorney deliberately set it because the want the defendants to fall into it.   

  

Unnecessary judicial admissions thanks to well-meant SOB-STORY NARRATIVES in pleadings 

Some unrepresented litigants may feel a need or urge to respond, and do so in writing. Some use it as an occasion to wail and vent. Bemoan their dire conditions and protest that they would have been paying if only they had the money. And that's understandable, but often meets with no sympathy. 

The harsh reality is that collection attorneys don't care. They have heard it all, and if it bothered them inflicting yet more misery on people already down on their luck, they wouldn't be doing it. Or not for long. Many judges don't care either. Debtors are just names and numbers. And dollar figures on judgments. To be processed. The more efficiently, the better. It will make the statistics look good. Attorneys have the upper hand because they are in court on a regular basis and interact with the staff. Not only are they lawyers, they know the ropes. How things are handled in a particular court.

Most defendants don’t know that under the Texas pleading rules they can answer with a general denial and then wait and see if the creditor files a motion for summary judgment or takes some other action. Instead they volunteer information that is superfluous under the pleading rules, and may amount to judicial admissions that can be used against them later. 

Luckily, the Texas Rules of Procedure are very liberal with respect to amendments. If a pro se litigant were to have filed an inappropriate answer but retains a lawyer before a dispositive motion is filed and heard, or the case goes to trial, the error can be fixed by filing an amended answer. Even if the deadline for amendment set by the seven-day rule or a docket control order has passed, a newly-retained attorney can file a motion for leave to amend the pleadings, which the court will probably grant.